Trading opportunities for currency pair: on the back of dollar growth and the Bank of England’s Mark Carney making an announcement, the GBP/CAD has done a U-turn downwards. If the pound drops any faster, there’ll be a basis for us to consider a head and shoulders trend.
On the basis of my markings on the way to the neck line (1.7528), the sellers will meet two important price levels: 1.8671 (a horizontal level from February 2014’s peak) and 1.8205 (the trend line). They will emerge as target levels. There’s a high probability that 1.8671 will be surpassed.
This week I’ve done two ideas on the pound (GBP/USD and GBP/CAD). It just so happens that the GBP/USD pair has broken its limit and that a beautifully constructed technical picture has formed on the GBP/CAD. Three weeks ago, a dark shaded candlestick was formed. Over the past two weeks the pound has lost 462 points.
Just a couple of words on the fundamental reasons for a fall in the pounds value against the Canadian dollar.
Firstly, the last time the Bank of Canada convened on 3rd March, they kept their monetary policy the same, leaving the base rate at 0.75%. Traders reacted to this by buying the Canadian dollar.
Secondly, on Thursday, 11th March, the Bank of England’s Mark Carney announced that there’s no rush to raise the base rate. The British pound ended up being under pressure throughout the market and the GBP/CAD pair was no exception.
On Friday the sterling continued to fall against both the US and Canadian dollar. The GBP/USD dropped to 1.8792. The main reason holding back the fall of the pound against the Canadian dollar was the fall in the price of oil. By the end of the day, a barrel of Brent had cheapened by 2.45 dollars to 54.77. The main reason for the fall in the price of oil can be put down to the significant excess of supply in relation to demand.
The fall in the price of oil was slowed by a report by American oil and gas servicing company Baker Hughes. The number of drilling rigs in the US, which peaked on 13th March, fell by 67 (-5.62%) over the week to 1,125 rigs.
So what interesting things did I notice on the weekly graph? Have a look at the consolidation from the 1.8668 maximum to 1.7539 which has lasted for 39 weeks. If the pound drops any faster, there’ll be a basis for us to consider a head and shoulders trend.
On the basis of my markings on the way to the neck line (1.7528), the sellers will meet two important price levels: 1.8671 (a horizontal level from February 2014’s peak) and 1.8205 (the trend line).
There’s a divergence between the AO and the price. The CCI indicator has crossed down below the +100 level. The technical conditions are ripe for a prolonged fall. Look to sell after a slide from 1.9020. If there is a slide, that is.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
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